The advisory council of the interim government on Thursday approved the plan to merge five troubled Shariah-based banks into a single state-owned Islamic bank to restore financial discipline and stability in the country鈥檚 banking sector.
The decision was made at a meeting chaired by chief adviser Professor Muhammad Yunus at the Chief Adviser鈥檚 Office at Tejgaon in the capital Dhaka.
After the meeting, Shafiqul Alam, press secretary to the chief adviser, said that the council approved the merger of First Security Islami Bank, Global Islami Bank, Union Bank, Exim Bank, and Social Islami Bank into a single entity.
The private commercial banks witnessed widespread anomalies, including loan scams, during the Awami League regime which was ousted in August past year amid a mass uprising.
Shafiqul said that two names 鈥� United Islami Bank and Sammilita Islami Bank 鈥� were proposed for the new bank.
The new bank will inherit all assets and liabilities of the five lenders, he said.
To recapitalise the merged entity, the government will inject Tk聽20,000 crore 鈥� half in cash and the rest half through Sukuk bonds 鈥� while Tk聽15,000-crore institutional deposits will be converted into shares through a 鈥榖ail-in鈥� process.
This will bring the total paid-up capital of the new entity to Tk聽35,000 crore against an authorised capital of Tk聽40,000 crore.
Shafiqul said that under the merger plan, no employee would lose job and no depositor would lose money.
Initially, the new bank will operate under the ownership of the Finance Division.
Once it stabilises and achieves operational efficiency, the government will gradually transfer its聽 ownership to the private sector 鈥� a process expected to take about five years, the press secretary said.
According to the plan approved by the advisory council, the shareholders of the five banks will not receive any compensation as all of the banks have negative net asset value and massive capital shortfall.
The Bangladesh Bank has decided to appoint an administrator to each bank once the banks receive budgetary support from the government.
Once the administrator is appointed, the board of the bank concerned will be dissolved and the managing director of the bank will lose job, BB officials said.
The administrators will run the banks and proceed with the government鈥檚 merger plan.
On September 7, the government approved the merger plan, pledging Tk聽20,000 crore in budgetary support to facilitate the consolidation.
As of September 28, 2025, the net asset value of First Security Islami Bank stood at negative Tk聽438.81 per share, that of Global Islami Bank at negative Tk聽117.72, that of Union Bank at negative Tk聽224.97, that of Exim Bank at negative Tk聽75.74, and that of Social Islami Bank at negative Tk聽213.51.
Their market prices have fallen to just Tk聽1.6鈥�3.7 per share, far below their face value of Tk聽10, according to official documents.
The merger aims to restore depositor confidence, re-establish accountability in the financial system and ensure sustainable credit flows to support economic growth.
The Bangladesh Bank initiated the process after asset quality reviews by international consulting firms KPMG (Sri Lanka) and EY (Sri Lanka) exposed large volumes of classified loans, severe liquidity crises and capital shortfalls across six Islamic banks 鈥� the five banks and ICB Islamic Bank.
However, ICB Islamic Bank was excluded from the merger due to the ongoing ownership-related litigation.
The Bangladesh Bank鈥檚 assessment showed that despite providing liquidity support for over a year, the financial health of these institutions continued to deteriorate.
As of May 2025, the five banks, which will be merged, together held deposits worth Tk聽1,36,546 crore and outstanding loans worth Tk聽1,95,413 crore.
Of the outstanding loans, about Tk聽1,47,000 crore or about 77 per cent turned into defaulted loans.
Defaulted loan ratios were alarmingly high: 98 per cent at Union Bank, 96 per cent at First Security Islami Bank, 86 per cent at Global Islami Bank, 62 per cent at Social Islami Bank and 48 per cent at Exim Bank.
The banks employ about 18,000 people and operate 780 branches and 698 sub-branches nationwide.
The central bank has already developed a 10-year business and financial plan for the merged institution, projecting gradual recovery and eventual profitability.
The planned merger marks Bangladesh鈥檚 first large-scale restructuring of Islamic banks under a formal framework.
The move comes after a series of financial scams and reckless lending practices involving S Alam Group, which reportedly borrowed over Tk聽1 lakh crore from the five banks through related companies.
Much of the loan amount turned defaulted, leaving the banks cash-strapped and unable to meet withdrawal demands, forcing the regulator to intervene.
Although the planned merger is seen as a bold step towards stabilising the country鈥檚 financial sector, it has caused worries for stakeholders.
Depositors at the five banks fear a delay in accessing their funds, employees are anxious about possible joblessness and shareholders face loss of their investments due to the banks鈥� negative equity positions.
